Trump policies drive boom recovery
The U.S. government has traditionally relied on increased state and local spending to fight recessions, but President Trump's direct stimulus payments tripled America's personal savings rate and created "pent-up demand" for a powerful economic recovery.
Fearing that the American public would save instead spend direct stimulus cash, Congress on a bipartisan level has responded to recessionary contractions in personal consumption by funding state and local government "investment" in infrastructure, K–12 education, and social services. But with cash staying in government hands, average U.S. recessions lasted 15 months before personal savings doubled and the economy begins to expand.
California in the Great Recession received $39 billion in direct federal stimulus cash from the "American Recovery and Reinvestment Act of 2009." But the stimulus mostly offset the state's $42-billion deficit to make sure that no state employees were terminated. The Golden State also pocketed another $10 billion in federal grants for investment boondoggles, such as the $3.4 billion for high-speed rail that never built any track and $4.6 billion for bankrupt Solyndra and other alternative energy projects.
With the Congress directing stimulus cash to state government, California's medium family income fell by 10.5 percent between 2007 and 2010. But the state's income inequality soared as the lowest 10 percentile of family income-earners suffered a 21.5-percent plunge, while the top 10 percent experienced only a 4.9-percent decline.
America's average distribution of family incomes in 2010 equaled 55 percent middle-income and 33 percent low-income. But with its 12.3-percent unemployment rate substantially higher than 9.5 percent national average, California's middle-income rate plunged to 47.9 percent, and the rate for low-income families spiked to 42.9 percent.
Due to California's budget deficit exploding to $54.3 billion in May, Gov. Gavin Newsom beseeched the federal government for direct stimulus to prevent layoffs of public-sector health, safety, and education workers. Newsom stated: "Without additional assistance, the very programs that will help people get back to work — like job training and help for small business owners — will be forced up on the chopping block."
But President Trump radically chose to prioritize putting money directly into the hands of the American public through his $2.2-trillion CARES Act that made $1,200 direct payments to 160 million and $600-a-week unemployment bonuses for 25 million.
Moody's Credit Rating Service reported that despite the record $1.4-trillion March–May 2020 collapse of U.S. personal consumer spending, Trump's direct stimulus payments caused disposable personal incomes to expand by $1.4 trillion year-over-year.
Moody's stated that with America's personal savings rate tripling from 8 percent to 23 percent during the period, "[n]ever before has a $1.4 trillion yearly contraction by consumer spending been accompanied by a $2.8 trillion yearly surge by personal savings." Moody's said the current "extremes in personal savings are without any remotely similar precedents."
Moody's forecasts that the "record personal savings may fund the release of considerable pent-up demand." The closest comparison for an ultra-high spike in personal savings rates is the 15.3 percent level reached in the second quarter of 1975 at the bottom of the three-year "Double Dip Recession." As result, the consumer spending yearly growth rate soared from 1.4 percent 6.3 percent over the next nine months.
Early evidence of a coming economic boom includes the June average index for homebuyer mortgage applications that jumped by 21 percent from May, and 16 percent from June 2019, to a new record high. In addition, lumber commodity futures were up 16 percent year-over-year due to homebuyer mortgage applications for the week ending July 3, jumping by 18 percent from a prior year.